All posts tagged BNP Paribas

The main European indexes finished the month of January with stellar gains and this optimism looks set to continue in the near term at least. Improvements in U.S. and European macro data have certainly helped set the mood–nonfarm payrolls are the next big data point on the agenda.

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Meanwhile, the City’s number crunchers keep churning out the daily broker notes. The earnings season has certainly provided much of the momentum here and has set the tone for today’s top picks. We’ll start with the banks.

Deutsche Bank has been upgraded by both JPMorgan Cazenove and Citigroup Friday, following the release of its fourth-quarter results. JPMorgan said that since October 2012, Deutsche Bank has underperformed the brokerage’s global investment bank coverage by 14%, underperformed European banks by 7% and is up only 5% on an absolute basis.

It said the bank’s capital improvement is on track. “Capital at risk curve balls remain but are being reduced,” said JPMorgan. Similarly, Citigroup has noted the bank’s underperformance versus European peers. With an underlying return on tangible equity of 10% to 12% over 2013 through 2015 and a number of contingency and regulatory risks easing, Citigroup thinks it’s time for an upgrade.

Sticking with the banking sector, BNP Paribas has been upgraded by Société Générale.

UBS, whose widely-praised investment banking restructuring was overshadowed late last year by the Kweku Adoboli and Libor-fixing scandals, was today tipped for success in a clutch of research reports on European banks. Giles Turner, from efinancialnews.com, dug around to find out why. Here’s a taster of his article.

Reuters

By Giles Turner

UBS underwent radical restructuring in 2012 and in October announced plans to cut 10,000 staff and all-but-exit fixed-income trading, a capital-intensive business. The move to slim its investment bank was roundly praised by analysts at the time.

In November, Morgan Stanley said in a note that the sweeping changes at UBS “have raised the stakes” for rivals.

UBS’s share price has risen by over 18% since the announcement–the stock was trading at €16.34 this morning–and according to Andrew Lim, banks analyst at Espirito Santo, it may have further to run.

In a report this morning, Mr. Lim noted that UBS has been trailing the SX7P Banks Index by 6% in the last month, and that the bank’s fourth-quarter results on Feb. 5 “will be the key catalyst for UBS to re-rate further to our target price, reflecting faster RWA reduction and with much lower exit losses than the market currently anticipates.”

UBS was also among the top choices of analysts from Berenberg, Barclays, and Morgan Stanley.

French bank BNP Paribas, like other European banks, came under pressure in the second-quarter as choppy capital markets took a toll on its investment banking results.

That was pretty much in line with market expectations.

On the plus side, the bank proved that it had come a long way with its far-reaching restructuring plan launched last year when it found itself in the eye of the euro zone debt storm alongside fellow French banks Société Générale and Credit Agricole.

It has now completed 90% of what it set out to do by cutting risk, reducing its exposure to funding markets and bolstering its capital against any future dramas. Its core Tier 1 ratio, a key measure of a lender’s capital strength, was 8.9% at the end of June, bringing it very close to its 9% December target and the amount demanded by European regulators.

It was an impressive achievement, leading Nomura analyst Jon Peace to say: “BNP Paribas is well ahead of its domestic peers and many international banks.”

European stocks are down again, and yes, you guessed, it, it’s all about Greece. Investors are concerned that the country is not going to get its bailout funds, while European officials are worried that much-needed austerity measures in Greece will not be implemented. Perhaps some of these equity rating changes will take your mind off these problems. Here are our top picks:

Morgan Stanley has upgraded Associated British Foods — a global foods, ingredients and retail company– to overweight from equalweight. The brokerage highlights that the expansion of ABF’s Primark business in Europe is accelerating and there is some upside potential to medium-term consensus expectations. Additional upside could come from sustained sugar volume growth from ABF’s exposure to growth markets in China and Africa, said Morgan Stanley.

Equity investors have a lot to digest Tuesday. The Greek saga is still continuing in Europe, Moody’s has downgraded six euro-zone countries and put triple-A rated U.K., France and Austria on negative outlook. Our selection of the key equity rating changes should help make the day a little easier. Here are our top picks for Tuesday:

European banks appear to be in focus across many of the analysts’ ratings universe and today is no exception. Barclays has been raised to outperform from neutral by Exane BNP Paribas. Exane said: “Barclays is highly geared to improving revenue trends.” Assuming static costs and impairments, the brokerage said every £1 billion of additional revenue at Barclays boosts underlying earnings per share by around 15%.

The main European indexes are heading for a positive end to the first week in February, with stock markets up around 2% in the week to date.

Meanwhile equity rating changes have kept the markets team on its toes. Here are our top picks for Friday:

• Goldman Sachs has taken a look at its three-, six- and 12-month targets for the FTSE 100, Euro Stoxx 50 and Stoxx 600 indexes. The brokerage expects equity markets to weaken in the first quarter on a combination of poorer macro data, weaker earnings and further pressures in sovereign debt markets.

But then, it expects markets to stage a strong recovery at around the second quarter:

Goldman’s analysts said:

“A combination of stronger than expected macro data, a favorable reaction to the European Central Bank’s longer-term refinancing operation and the Fed’s policy message, and progress on sovereign debt discussions has supported risky assets.”

It’s a sea of red on the screens in Europe Monday and it has been a busy morning of upgrades and downgrades. Here are our top picks of the session:

• Bank stocks are the biggest fallers in Europe and BNP Paribas and Societe Generale are leading the declines after BofA-Merrill Lynch downgraded the stocks to underperform from neutral and neutral from buy respectively. The brokerage cited recent stock price performance and proposals by François Hollande, the opposition Socialist presidential candidate, to rein in French banks by raising taxes and separating commercial from investment banking.

Here’s a selection of the key European equity rating changes Friday and why you should be keeping an eye on these movers and shakers:

• JPMorgan Cazenove has taken a critical look at the French banking sector Friday, stating that more structural deleveraging is inevitable. The U.S. investment bank downgraded BNP Paribas to neutral from overweight, on valuation grounds, and Credit Agricole to underweight from neutral, citing its high exposure to Greece and lower capitalisation levels. Societe Generale is JPMorgan’s preferred stock in the sector, maintaining it at overweight.

JP Morgan’s analysts said:

“The ECB’s LTRO [long-term refinancing operation] is a material positive as it removes the liquidity risk and provides short term relief to funding and deleveraging pressures. However, long term structural issues remain with French banks still over-leveraged, and there is still €100 billion of further deleveraging required.”

• Staying with the banking sector, Credit Suisse turned its eye to Turkey, saying the “market seems to have already priced in most of the negatives for 2012, and current valuations provide a good opportunity to build positions in Turkish banks.” The Swiss banking giant upgraded Yapi ve Kredi Bankasi to outperform from neutral, stating that its relative valuation looks attractive after underperforming the sector by 13% since October last year.

restructuring plans of the financial institutions, which are aimed at freeing up capital, will be in difficult market conditions.

A day after the European Banking Authority said it estimated French banks needed to increase their capital by just €7.32 billion–significantly below its October estimate of €8.8 billion–to comply with tougher rules intended to help stabilize the euro zone, Moody’s downgraded the financial strength, and long-term debt and deposit ratings for BNP Paribas, Societe Generale and Credit Agricole.

Moody’s lowered the long-term debt rating of BNP Paribas, France’s largest bank by market capitalization, to Aa3. Societe Generale, the second-largest, was downgraded to A1, and Credit Agricole to Aa3.

While the downgrade only brings Moody’s in line with other agencies’ ratings of the big three, it once again highlights significant concerns about French banks.

Despite their efforts to shrink their balance sheets in a bid to increase capital buffers and reduce financing needs, French banks continue to face major liquidity and funding constraints, and remain significantly exposed to the sovereign debt of troubled Southern European states, Moody’s said.

Credit Agricole was the only one of France’s top four banks that wasn’t identified by the European Banking Authority as having a potential capital hole, but its third-quarter results failed to reassure investors that it is better off than its cross-town rivals.